What are the disadvantages of Chapter 13?
Debtors remain under court supervision for the life of the plan, which is up to five years. They are not free to incur new debts or sell assets without permission. They cannot use or pay credit cards. Debtors who propose less than full payment to their unsecured creditors will be required to live on a budget for the life of the plan. The plan payments may be deducted directly from the debtor's salary by order of the court. If plan payments are not made, the case may be dismissed by the court.
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How does Chapter 13 work?
Under Chapter 13, the debtor presents a plan of debt repayment which is reviewed by the Chapter 13 trustee, creditors and the Bankruptcy Court. The plan must be filed in good faith, must provide for payments that are feasible in light of the debtor's income and expenses and must also provide for payments over time that are equal in value to the money creditors would have received if the debtor had chosen Chapter 7 liquidation instead of Chapter 13. The plan must also provide that, for a period of three to five years, all of the debtor's income above reasonable expenses will be used to pay debts. If the Chapter 13 plan is approved, all payments are made through the Chapter 13 trustee's office. Chapter 13 provides that the debtor receives a discharge from most pre-bankruptcy debt upon making the payments called for by the plan.
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What are the differences between Chapters 7 and 13?
In Chapter 7 if the debtor does not have assets that exceed what they are allowed to keep and they do not have excess income, then the Chapter 7 debtor is promptly discharged from all or most pre-bankruptcy debts and receives a fresh start. The proceeding lasts about 4 months in many cases. No payments or distributions are made to creditors.
If debtors have excess household income and have the means to pay back some of the debt, then Chapter 7 may not be appropriate and may be considered abusive. A means test is used to project future income of the debtor by considering the past 6 months of income. Projected expenses are considered based on national, state and local standards of living, household size, secured debt obligations, healthcare expenses, support payments, childcare and many other factors. If the means test and current circumstances which may be considered in addition to the means test results in a conclusion that filing Chapter 7 would be abusive, then the debtor may file a Chapter 13.
Chapter 13 is entitled "Adjustment of Debts of Individuals with Regular Income." Chapter 13 debtors pay all or part of their debts through future income rather than through the sale of present assets. Corporations and partnerships are not eligible for Chapter 13. The Chapter 13 debtor's income must be regular, but can come from self-employment, pension, welfare or alimony.
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What is bankruptcy?
Bankruptcy is a law that helps people whose debt has become overwhelming. The law helps manage the debt by requiring all creditor information to be gathered in one proceeding where creditors are notified. The debtor is expected to make a complete financial disclosure of all assets and debts, income and expenses and to answer questions about their financial affairs. The court appoints a trustee to administer the case. If you are having problems paying bills or are being threatened by creditors with lawsuits, wage garnishment or bank garnishment, bankruptcy may offer a solution.
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How do I obtain relief from my creditors?
For certain people, filing a bankruptcy case will achieve the relief from debt that they seek because a bankruptcy can result in the grant of a discharge of debts to an individual. A discharge is the forgiveness of personal liability for debts which have been incurred prior to the filing of the case. With few exceptions, creditors are prohibited from suing a debtor, obtaining a judgment or collecting on debts which have been discharged.
Bankruptcy, while it may relieve a personal obligation to repay a debt, does not eliminate most mortgages or liens on property. In order to retain a car or a house which has been pledged as collateral on a loan, a debtor will ordinarily have to continue paying the debt.
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What are my alternatives?
Non-bankruptcy alternatives include debt settlement, but credit may not be restored and often the client does not have sufficient assets or income to satisfy a debt settlement. To avoid lawsuits, judgments, wage garnishment and bank account garnishment, individuals may choose several different types of bankruptcy. The choice of a particular chapter will depend upon the financial circumstances of the debtor, household income, the amount and nature of the debt and the types of assets owned by the debtor.
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Will all my debts be discharged?
A debtor cannot discharge certain debts, including most taxes, student loans, alimony and child support, debts incurred through fraud or theft, and certain other types of non-dischargeable debt.
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Will all my debts be discharged?
A debtor cannot discharge certain debts, including most taxes, student loans, alimony and child support, debts incurred through fraud or theft, and certain other types of non-dischargeable debt.
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Will I be able to retain any of my property?
In Georgia, each debtor can retain:
- $10,000 in real estate equity of your principal residence – the amount of property value in excess of mortgages and liens on the real property;
- Social Security benefits, unemployment compensation, veteran benefits, disability benefits and alimony;
- The debtor’s interest in funds held under certain retirement or pension plan systems and payments from those plans needed for the support of the debtor and the debtor’s dependents;
- $3,500 in equity in vehicles;
- $300 in each of various items of household furnishings and wearing apparel, up to a total value of $5,000;
- $500 in jewelry;
- $1,500 in professional implements, books and tools of the trade; and
- $600, plus the unused portion of $5,000 of the principal residence exception as a wildcard. A wildcard may be used for any asset that is not in an exemption category or to excess asset values in an exemption category
There are other less common exemption rights as well.
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